According to a new report, if you’re renting a house in hopes of saving money, you might want to re-think that strategy. Amy Yale at The Mortgage Reports shows that single-family rents are up significantly over the year –particularly on lower-end properties.
You can access Amy’s article in its entirety here….
On lower-priced properties (those with a rent lower than 75 percent of the regional median), rents have risen nearly 4 percent in the same period.
Molly Boesel, CoreLogic’s principal economist, says growing demand for entry-level homes is the single largest factor:
“Single-family rent price growth remained solid in January,” Boesel said. “High demand and low supply for entry-level properties drove lower-priced rentals to have faster price growth than higher-priced rentals, revealing affordability pressures in this segment of the rental market.”
The reason for these regional increases? Per Hale and CoreLogic, it’s strong economic growth, low levels of new construction, and increasing employment opportunities.
“Phoenix experienced 4.5 percent year-over-year rent growth in January 2018, driven by employment growth of 2.7 percent,” CoreLogic reported. This is compared with the national employment growth average of 1.4 percent, according to data from the United States Bureau of Labor Statistics.
This nationwide problem threatens to get worse before it gets better. Apartment builders are building more units, potentially creating supply that is beginning to crest. With that said, demand still exceeds the supply, especially for affordable housing.
Continuing The Trend
The relentless shortage of housing has lead to dramatic increases in rental rates – and the implications of high rent, and declining home ownership, could be profound over time.
“Almost all the housing demand in recent years has been filled by rental units,” says Sara Strochak, a research assistant with the Urban Institute. She also states that single-family rentals have gone up 30% within the last three years.
The trend began with large firms buying up cheap homes during the recession and turning them into cash-generating rentals—often rented by families who’d lost their own homes or who could no longer qualify for mortgages.
As is always the case with the supply and demand curve, high number of renters has caused rents to increase significantly – in many places, high enough for buying to become the better option.
One of the great underlying opportunities here is that buying a home can actually be cheaper than renting. Renters interested in reducing expenses and collecting tax benefits should absolutely talk to a mortgage lender prior to signing that rental contract.
Current market trends this summer really should encourage home ownership – find out more here….
Mortgage uunderwriting guidelines have been slowly loosening and those that were denied for a mortgage last year may qualify this year. There are also multiple down-payment assistance programs for borrowers with little to no down payment available.